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2009 SCC OnLine Bom 2373 : (2014) 183 Comp Cas 478

In the High Court of Bombay

(BEFORE D.K. DESHMUKH AND R.S. MOHITE, JJ.)

Lonza India P. Ltd.

Versus
Corporate Management Council of India P. Ltd.
Appeal No. 175 of 2009 in Company Petition No. 898 of 2008 and Notice of Motion
No. 1436 of 2009
Decided on July 1, 2009

Page: 479

JUDGMENT
1. Admit. By consent of parties, heard finally.
2. This appeal is directed against the order dated February 12, 2009 2 passed by
the learned single judge of this court in Company Petition No. 898 of 2008 (Corporate
Management Council of India P. Ltd.) v. Lonza India P. Ltd. [2009] 150 Comp Cas 898
(Bom)). By that order, the learned single judge has directed the appellant-company to
deposit an amount of Rs. 3,50,00,000 (rupees three crores fifty lakhs only) by a
particular date, and failure of the appellant to deposit that amount was to result in
admission of the petition. The respondent has filed a company petition under sections
433 and 434 of the Companies Act, 1956, seeking winding up of the appellant-
company on the allegations that it is unable to pay its dues. The relevant facts are that
an agreement was entered into between the parties dated April 3, 2008. Pursuant to
that agreement certain premises were to be given on leave and licence by the
respondent to the appellant. The period of licence was to commence from May 1,
2008. The licence was for a period of 60 months. But the period of first 36 months was
treated as lock-in period. Admittedly, this agreement is terminated by the appellant
on April 16, 2008. The period of licence was to commence on May 1, 2008. Thus,
before commencement of the licence period the agreement was terminated. The
respondent was claiming amount

Page: 480

from the appellant relying on the recitals in the licence agreement. Clauses 5, 6 and 7
under section 9 are relevant, they read as under (page 901):

“5. This licence is granted for a fixed period of 60 months ending April 30, 2013.
The first 36 months ending April 30, 2011, shall be a lock-in period for both parties.
6. The liability of the licensee to pay the licence fee for the entire duration of the
lock-in period and notice period of this agreement is absolute and the same shall
not be varied or reduced even if any item of the said furniture, fixture, fitting or
equipment is damaged, destroyed or discarded.
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7. If the licensee shall terminate this agreement prior to expiry of lock-in period
or subsequent notice period then in that event the licensee shall be liable to pay to
the licensor a sum equal to the balance period left of the lock-in period or notice
period licence fee. The licensor shall be entitled to recover such amount from the
security deposit.”
3. According to the respondent, though the licence period had not started, the
agreement between the parties had come into effect on the agreement being signed
by the parties, and therefore, under clause 7 as the agreement was terminated prior to
expiry of lock-in period, i.e., before the date April 30, 2011, the company was liable to
pay to the respondent a sum equal to the amount of licence fee for balance period of
the lock-in period. The learned single judge has held that the sum mentioned in clause
7 quoted above is payable by the company to the respondent and he assumed that
this is the amount of liquidated damages and he, in favour of the appellant, reduced
the amount to Rs. 3,50,00,000 and issued the directions accordingly.
4. We have heard learned counsel appearing for both the sides. In our opinion,
reading clauses 5, 6 and 7 of the agreement which have been quoted above, it cannot
be said that the only meaning that can be attached to clause 7 is that even if the
agreement is terminated before the licence period has commenced the appellant
becomes liable to pay licence fee for the balance lock-in period. In our opinion, it is
possible to construe clause 7 to mean that if the licence is terminated or the
agreement is terminated after the commencement of lock-in period then liability is
cast on the company to pay licence fee for the balance period. In our opinion, two
words used in clause 7 are crucial. One is that for clause 7 to be brought into effect
the agreement has to be terminated prior to the expiry of the lock-in period. In our
opinion, one way of looking at it is that for expiry of the lock-in period, it

Page: 481

is necessary that the lock-in period must commence. The other crucial words in the
clause, in our opinion, are sum equal to the balance period left of the lock-in period.
Therefore, it will not contemplate payment for the entire lock-in period as is claimed in
this case. In our opinion, these words indicate that for this clause to come into force,
the lock-in period must have commenced and therefore, the payment is contemplated
for the balance period left of the lock-in period. This should not be understood to say
that this is the only interpretation possible of clause 7. The other interpretation
accepted by the learned single judge may also be possible. However, in our opinion, as
the other interpretation is also possible and this was not a case where winding up
petition can be admitted. In our opinion, when there is bona fide dispute on the
interpretation of the terms or the words in the agreement, it would have been
appropriate for the learned single judge not to entertain the company petition and
leave the parties to their remedy under the civil law. In our opinion, remedy of filing
winding up petition cannot be allowed to be used in a case where it is possible to take
different view than the one propounded by the petitioner. In our opinion, the learned
single judge, therefore, was not justified in entertaining the petition.

5. In the result, therefore, the appeal succeeds and is allowed. The order dated
February 12, 2009, passed in Company Petition No. 898 of 2008 is set aside. That
company petition is dismissed. Appeal is disposed of.
6. Notice of Motion No. 1436 of 2009 is also disposed of.
———
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